Setting an Ethics Code for Your Firm

by Bruce Kelleran, CKD, CPA On Dec 1, 2002

Most of us have stood by and watched in disbelief as one
business leader after another has admitted to cheating, lying and
stealing from their companies and shareholders. While these
businesses and their problems may seem far removed from our own in
the kitchen and bath industry, we should all be asking ourselves,
"How could this be happening?"

During the last decade, it seems that a new attitude toward
work, relationships, ethics and morality has crept into our daily
lives. A long period of economic expansion and prosperity has led
many in our society to develop a sense of entitlement that had not
been present previously. Here, we will look at how this situation
may have evolved, how it might have crept into our businesses and
what to do about it.

The Wayward Path
Since the end of World War II, the United States has experienced
nearly continuous growth and prosperity. Each generation has begun
life with material well-being not known to the one before. As time
went by, material success seemed to overshadow all other values for
a larger portion of the population.

Along with the rising pursuit of material success, the teaching
and promotion of ethics and ethical practices seemed to decline.
While there have always been elements of society that dealt in
situational ethics, skirted the laws, or were simply criminals, the
distinction seems to have blurred over time.

Finally, there came the myth of the "new economy," which
portended that technology had changed the rules and that businesses
could be built and grown on the wildest of ideas. Profitability
became a distant future goal, while growth, for growth's sake,
became the mantra. As losses mounted and these businesses gobbled
cash, they returned to the stock market time and again, hyping
their potential to investors to raise the cash needed to
continue.
It was only a matter of time until the hyped facts became
manufactured facts to keep their houses of cards intact. The need
to satisfy a stock market that seemed to offer up ever-improving
earnings and growth inevitably led to the "cooking of the books" to
which we have recently been exposed.

There's a tendency to think that such pressures and practices
just don't happen in small businesses such as ours. While most of
us do not have the stock market to which to answer, this doesn't
mean that there's not a temptation to cut corners and shade the
truth in an effort to survive amid torrid competition and difficult
economic circumstances.

Before you dismiss these temptations as not applying to you, ask
yourself the following questions:

How do I deal with those gray areas of my taxes?
'

Do I ever use company assets for my own personal
projects?
'

If I make a pricing error in my company's favor, do I make the
adjustment to my customer?
'

Do I think it's okay for my employees to use customers' tools
and equipment to do our work?
'

Do I expect employees to work excessive hours without being
compensated for their time?
'

Do I trust the stakeholders (employees, bankers and investors)
to really know what the financial condition of my business is?

This is obviously not an exhaustive list of ethics questions
that we face on a daily basis, but it should drive home the point
that there are few things that are completely black and white in
our business decisions. Never doubt that, as a kitchen and bath
firm owner, your employees are watching to see how you deal with
these, and will tend to follow the example you set.

We need to keep in mind that we are dealing with a group of
employees who have grown up known as the "me" generation. This is a
group that is noted for not committing to organizations, changing
employment easily and often, and tending to place their own career
goals ahead of the success of their employers.

What Can Be Done
As mentioned above, your employees will look to you for the example
of how to deal with ethical issues. Let's look at some of the
things you might do to provide this kind of ethical leadership.

Ethical leadership has many of the same elements of good
leadership in general. Start by not expecting more from your
employees than you do from yourself, taking the lead when tough
assignments or tasks arise. Follow up by showing confidence in your
employees and their decision-making process.

The next step involves teaching the ethical decision-making
process you would like to see followed in your business. To
communicate the types of ethical decisions you want your employees
to make, you need to take the lead and demonstrate them through
your own actions.

The teaching process comes when you feel that one of your
employees has made a poor decision. How should you handle the
situation when you find an employee has fudged on a time card, cut
a corner on a project or used company tools to perform a side job?
The key is to ask yourself if this is a new problem or a recurring
one.

Assuming that this is a "first offense," it's important that it
be addressed immediately with the employee involved. As with any
criticism or correction of an employee, it should be handled in
private and the discussion ought to be limited to the specific
incident that occurred. It is, however, an excellent opportunity to
have a discussion of the importance of personal integrity as it
relates to our customers and to the morale of other employees. When
you need to have one of these discussions, you can see the
importance of you personally "walking the talk."

One of the most important assets your business has is its good
name and reputation for honesty. This issue runs to the heart of
the "culture" you create for your business, and it must be guarded
jealously. Make sure everyone in your organization knows where you
stand on ethics and integrity. If you tolerate lapses, it's only a
matter of time until it develops into serious trouble for you and
for your business.